Capitalism – Merits and Demerits

Capitalism is the most common and modern social system, widely acceptable by advance economies. This system advocates for the principle of individual rights. The basic philosophy behind is “economic liberalism.” This School of thought believes that there should be less intervention of government in economic affairs. General demand and supply forces are controlled privately, and government role is to protect the legal rights of people. In this economic system all the means of productions are owned and controlled by private people. There is a free market where people have the liberty to invest their capital to earn profit.

Statistics show that this is the most successful system as compare to any other system, especially if we compare it with communism. The economic growth is manifold as well as the per capita income, which leads to a better living standard for general public.

Democracy and capitalism go together and share the basic philosophy. It has the democratic essence that every individual have right to achieve the maximum economic and social position. These also are proven true where these systems are implemented. Generally there are four types of capitalism exist Market-let, Corporate, Social-democratic and state-led.

Merits of Capitalism

[adsense1]Economic Growth: Rapid and consistent economic growth is the proven out come of this Capitalism. As there is less government intervention so many evil like corruption, nepotism, poor management did not hurt the growth rate. These are the common evils comes with authority. Another reason of this growth is when people invest their own money the make best effort to make profit out of it.

Efficient Allocation of Resources: The means of production utilizes at the optimum level because the individual interest is involved. Resource used to produce the products needed and in demand of market.

Efficient production: A competitive environment is there as every individual can takes any profit making activity. Competition push producer to take productive steps like cost cutting, new technology and use of best supply chain for make good profit.

Financial incentives: Better financial gains are proven pushing force, for people to being involved in productive activities.

Demerits of Capitalism

Inequality: The biggest argument against capitalism is inequality, in the free economies system the more talented and innovative people build strong financial position as compare to less skilled individuals. So this trend leads to inequality of distribution of wealth. Money makes money it is true in capitalism people who have the money invests their capital to different businesses and earn more money. Those who do not have the money cannot avail such opportunities and remain being deprived.

Lack of Welfare: Capitalism has no feelings it is all about the materialistic efforts. This is the most popular reason vocal against capitalism when compare to communism. In communism the whole philosophy is human welfare in common, this aspect is totally missing in capitalism. Capitalism talks about reward of effort to individuals and advocate for it but do not discuss the interest of society and other stake holders.